Small banks tell ASIC to lift its game

Small banks think the banking watchdog has to lift its game if there is to be true competition among financial institutions.

In its submission to the federal government's competition policy review, the Customer Owned Banking Association (COBA) calls for a crackdown on misleading banking information given to consumers.

COBA - which represents credit unions, building societies, mutual banks and friendly societies - says the Australian Securities and Investment Commission (ASIC) should be taking a tougher stance on multi-branding by major banks.

Its CEO Louise Petschler says in a genuinely competitive market, consumers need to be able to easily understand the true identity and regulatory status of the entity they are dealing with.

She said the Australian Competition and Consumer Commission was cracking down on big companies that portray themselves as small businesses because this practice misled consumers and was anti-competitive.

"However, ASIC appears complacent about addressing major bank sub-brands, such as Bank of Melbourne and Aussie Home Loans, and has not launched a campaign against the practice in banking," Ms Petschler said in a statement on Thursday.

The Bank of Melbourne is a division of Westpac, while Aussie Home Loans is 80 per cent owned by Commonwealth Bank, albeit operating as a stand-alone business.